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Richard Cordray and Over-Regulation

A vote is scheduled today on the nomination of Richard Cordray to be the director of the Consumer Financial Protection Bureau (CFPB) in the Senate Banking Committee. This nomination battle is a proxy fight over Dodd-Frank, also known as the “Wall Street Reform Bill,” and regulatory excess. Expect Republicans to fight the Cordray confirmation as a means to slow a regulatory behemoth that imposes a hidden tax and narrowing of choices for American consumers.

The Hill reports today Cordray is expected to pass in committee, yet his nomination is in doubt on the Senate floor:

The Senate Banking Committee will vote on whether President Obama’s selection to head the new agency should win the gig, but the vote will likely be the latest round in what has been a knock-down, drag-out partisan fight over the agency and how it should operate. While it’s expected the former Ohio attorney general will advance on a party-line vote, Cordray’s nomination could get stuck on the winding yellow brick road instead of landing on the express lane to the full Senate.

Dodd-Frank has already hit consumers hard this month. According to the Washington Times, Bank of America’s new $5 per month fee for debit card use is a direct result of the so called reforms imposed by the law.

New debit cardholder fees are a direct result of price controls mandated by Mr. Durbin’s legislative handiwork, Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka the Durbin Interchange Amendment) which Mr. Obama signed into law on July 21, 2010. Debit-interchange fees that took effect Oct. 1 for banks with more than $10 billion in assets were capped at 50 percent below market rates, while small banks are exempted. Merchants, not banks, can now pick network transaction routes that enable them to drive down the revenue of both small and Goliath banks. But for the Fed’s charitable implementation, it would have been worse. The legislation was intended to reduce fees by more than 90 percent.

As usual, regulations have unintended consequences, a narrowing of consumer choice and increased consumer cost. Republicans have been fighting to repeal regulations that impose a high cost on the economy while having little rational purpose. It is consistent with that philosophy for Republicans to take action to slow the CFPB regulatory machine. If allowed to march forward, the CFPB will mass produce a regulatory web that is expected to entangle Wall Street and further slow economic growth.

As I wrote in September on Red State, this nomination is expected to become a referendum on the CFPB and Republicans seem almost unified in blocking the creation of another regulatory monster:

The only way for Senators to stop regulations in the short term is to block the work of the newly created Consumer Financial Protection Bureau (CFPB). This bureau will be a regulation creating machine and an entity that will slow economic growth — much like Obama’s 191 pending regulations. The only way for Senators to stop the bureau from mass producing new regulations is to refuse confirmation of the president’s nominee to head the Bureau, Richard Cordray.

After this nomination passes the Senate Banking Committee today on what is expected to be a party line vote, it moves to the full Senate for an expected filibuster. Republicans have pledged to force a 60 vote threshold as a means to protect the economy from over-regulation.